Wednesday, 4 December 2013
Clean Energy Finance Corporation (Abolition) Bill 2013; Second Reading
Some bills that enter this place contain subtle nuances but not so this bill, the Clean Energy Finance Corporation (Abolition) Bill 2013. The point of this bill is very simple: it is just the government trashing the joint purely for the self-interest of their friends in the non-renewable energy sector. Slash, cut, trash—that is already the hallmark of the Abbott government. They do not believe in climate change, so they will destroy the Clean Energy Finance Corporation. They are like small children having a tantrum and smashing their toys to bits.
The objective of the CEFC is pretty simple to see. It is to overcome capital market barriers that hinder the financing, commercialisation and deployment of renewable energy, energy efficiency and low-emissions technologies. The CEFC invests in firms and projects using these technologies as well as manufacturing businesses that focus on producing the inputs required.
This move to destroy the Clean Energy Finance Corporation is pointless and is counterproductive. Confirmation of just how pointless and counterproductive this move is came in the recent supplementary Senate estimates hearings. Under questioning from Senator Wong, Clean Energy Finance Corporation chair Ms Jillian Broadbent highlighted just how successful the corporation had been at leveraging private sector investment for clean energy projects. She said:
We have invested $536 million. That has been matched three-to-one with private sector funds, so it has resulted in $2 billion of capital investment in the sector. There has been $2 billion worth of capital expenditure in the sector because with every $1 we invest we have mobilised $3 of private sector funds.
This shows that the Clean Energy Finance Corporation is performing exactly the way it was intended to. What makes this move to abolish the Clean Energy Finance Corporation even more bizarre is that it is making a profit. I quote Ms Broadbent again:
We have comfortably covered the government's cost of funds and our own operating costs, so we are earning about three to four per cent over the government bond rate.
And she said:
If we continue at the pace of investment, we certainly would be paying dividends to ARENA …
… … …
… at the end of 2015.
So this government wants to abolish an organisation which is not only spectacularly successful at leveraging private finance for clean energy projects but turns a profit as well. The government claims it wants to reduce debt, yet here today it is seeking to close an agency which is turning a profit. I do not know that I would call that good economic management. It is utterly incomprehensible to us on this side.
I will quote the CEO of the Clean Energy Finance Corporation Mr Oliver Yates, who also appeared at the supplementary budget estimates. He said:
The projects that we have done so far actually achieve emission reductions of approximately four million tonnes per annum. … That already constitutes about three per cent of the government's challenge in meeting its negative five per cent baseline.
That is, they have already provided finance for projects that will deliver 60 per cent of our emissions reductions target and have leveraged $1.5 billion worth of private sector investment, all while making a four per cent profit. And those opposite want to close it down!
On top of that, closing the Clean Energy Finance Corporation—an enterprise, as I have said, that is making a profit—will involve a significant cost. To once again quote Mr Yates at the supplementary estimates hearing:
The best indication of that is the underlying cash balance forecast, which actually shows that the government would actually lose $80 million over the forward estimates period by closing the CEFC down, before we even get to any of the close-down costs of staff costs and everything else.
To repeat: that is a loss of $80 million before the costs of redundancies and breaking leases and other contracts.
This decision and this bill are utter lunacy. It is madness. The Clean Energy Finance Corporation is there to encourage investment in the clean energy sector, and it is performing this role exceptionally well. The contracted CEFC portfolio consists of 12 CEFC transactions, including one subsidiary transaction under the CBA Energy Efficient Loans to a value of $483 million and the Low Carbon Australia investments to a value of $54 million. This represents a total of 47 projects. Its portfolio represents a diverse mix across the economy with projects comprising 56 per cent of renewables, 30 per cent in energy efficiency and 14 per cent in low-emissions technologies. The projects are spread across the country in agribusiness, property, manufacturing utilities and local government. It has financed projects involving wind, solar and bioenergy across Australia, both on grid and off grid, as well as energy efficiency and low-emissions technology projects in manufacturing, buildings and local government.
One of the projects funded by Low Carbon Australia, now the Clean Energy Finance Corporation, was a lighting upgrade for the local government civic centre across the road from my office in Kingston, Tasmania. As another Tasmanian senator, Senator Bushby should be very interested in this. That has cut the building's lighting energy costs by 75 per cent. The Kingborough Council replaced the building's fluorescent lighting system with more energy efficient LED tube lighting to make energy savings of more than $11,000 a year. The council covered the $45,000 up-front cost with finance from Low Carbon Australia, now the CEFC. I do not know how Senator Bushby will be able to support this bill, bearing in mind that that is just one example of help that the organisation has given to a great Tasmanian council. Of course, with that it has the expected 20-year life expectancy of LED lighting compared with four years for the old fluorescents, so that means the council is also saving on its maintenance costs.
Other projects as outlined in the Clean Energy Finance Corporation submission to the Senate inquiry into this package of bills include a $100 million energy-efficient loan facility, co-financed with the Commonwealth Bank, to provide funding to smaller businesses, particularly supporting the needs of the manufacturing sector, to upgrade facilities and equipment to be more energy efficient and reduce energy costs while reducing carbon emissions.
The CEFC is co-financing Sundrop Farms' 20-hectare greenhouse development near Port Augusta, South Australia. This will use solar thermal technology to desalinate seawater to provide irrigation and to heat and cool the greenhouses. Sundrop Farms' facility will produce over 15,000 tonnes of tomatoes a year for metropolitan markets across Australia. The project is an exciting demonstration of how new technology can be applied to transform the Australian economy and create new industries and jobs, which are most important, in regional areas. This project will be a demonstration of sustainable horticultural practices at scale, addressing the challenges of food security, water and energy availability.
A new wind farm near Taralga, New South Wales, co-financed with ANZ and EKF, which is the Danish government's export credit agency, will use Australian-manufactured towers made in Portland, Victoria, from BlueScope Steel. This project is providing a boost for the local wind-engineering sector and will further develop Australian manufacturing capability in supply-chain scale, creating valuable regional employment.
The CEFC is providing $75 million in corporate finance to Energy Developments Limited for investment in new projects generating energy from waste coalmine gas and landfill gas. Using fugitive emissions from coalmines and landfill to generate electricity that would otherwise come from higher emission sources creates significant environmental and economic efficiency benefits.
The CEFC and National Australia Bank are co-financing Australia's largest beef company, Australian Agricultural Company Limited, for the installation of solar photovoltaic units across 15 grid-connected sites in Queensland and an innovative on-site waste-to-energy project at Darling Downs Fresh Eggs at Pittsworth, also in Queensland. These small-scale projects provide a good demonstration of the strong business case for on-site renewable power plants. The CEFC has received a strong market interest for productivity-enhancing projects like this one.
The CEFC's participation in the Macarthur Wind Farm refinancing and sale by Meridian Energy has demonstrated that developers of large-scale renewable energy projects in Australia could successfully complete a development and finance exit cycle. CEFC's finance helped ensure efficient market pricing and encouraged other banks to participate.
The CEFC is providing up to $60 million of debt finance to Moree Solar Farm for the development and construction of a 56-megawatt solar photovoltaic power plant in northern New South Wales. The CEFC's participation in this project is a first in the Australian market for financing large-scale solar photovoltaic projects.
The CEFC has provided finance to enable the final stage of the Portland Wind Energy Project to start construction after 10 years of development. This is a world-class wind site, and the project involves significant local industry participation. It has strong community support, all of which makes this hallmark project demonstrate the CEFC's vital role in driving new investment.
In their submission to the inquiry into this bill and the other carbon repeal bills, the Investor Group on Climate Change said:
The Clean Energy Finance Corporation has played an important convening role in the finance community and increased the pipeline of investable low carbon opportunities. In what is a nascent low carbon investment market, an independent, third party co-financing organisation, with a commercial, approach builds confidence and capacity in the market. CEFC has played such a role.
Evidence from the CEFC's early operations indicate that the organisation is delivering on its mandate of attracting private investment (with a 3:1 contribution of private to public finance) and achieving low cost abatement (a negative cost of $2.40/tonne).
Co-financing is likely to continue to be a key element of climate policy globally and it is in Australia's interests to use this model as part of its climate change policy suite.
I guess we have to ask ourselves: what is the impact of shutting down the Clean Energy Finance Corporation? Mr Yates, once again in Senate estimates, said:
But the impact of the shutdown of the CEFC would actually be quite broad at this stage. There is considerable uncertainty in the market, and the CEFC is playing a very active role in trying to enable people to continue to pursue transactions in an environment of uncertainty. So, for many project participants, this will continue a trend which will probably see them not be able to finish projects that they would have liked to have finished.
In their written submission to the inquiry into this bill, the Clean Energy Finance Corporation said:
As at 20 August 2013, the CEFC had … received proposals … from over 170 project proponents seeking CEFC finance of over $5 billion (with total project costs of over $14.9 billion) … It is clear that demand for the CEFC from the market remains extremely high.
And they said, 'This means that billions of dollars worth of investment, maybe over $10 billion worth of investment, is at risk were this bill to pass.'
We have seen that the corporation has been successful financing clean energy projects, that it has been successful at leveraging investment from the private sector, that it has been successful at increasing the investment pipeline of renewable energy in Australia and that it has even been successful at turning a profit. So why are we here today? Why are we debating this bill? Why are we closing down the Clean Energy Finance Corporation, when, to quote Mr Yates yet again, 'Bloomberg New Energy Finance is indicating that there is $58 billion being lent by equivalent agencies like the CEFC this year alone on the renewable energy sector and about $109 billion in the energy efficiency sector?'
Why are we closing down the Clean Energy Finance Corporation when the UK, Japan, Malaysia and the US are setting up similar bodies? Even Mr Abbott's conservative friend in the UK, Mr David Cameron, has set up the Green Investment Bank for similar reasons and on a similar model to the Clean Energy Finance Corporation. Why are we going to allow other nations to take the lead and develop new industries, leaving Australia stuck in the last decade? Is it really because those opposite are so petty that they want to trash absolutely everything the last government did?
This bill we are debating today says that the government are willing to destroy thousands of jobs in the clean energy sector, that they are willing to close an agency making a substantial profit, that they are willing to cost the taxpayers over $80 million closing it down and that they are willing to completely destroy any chance we have of reaching our five per cent emissions reduction target by 2020 so that the former Labor government gets no credit. This move is unbelievable. In fact, it is quite disgusting. What is more disgusting is that those opposite are so arrogant that they have presumed the power of this place and are seeking to shut down the Clean Energy Finance Corporation without the agreement of this Senate.
The Treasurer, Mr Hockey, recently wrote to the board of the Clean Energy Finance Corporation instructing it to 'suspend operations and cease making payments'. Mr Hockey cannot just order the closure of an independent statutory agency without the consent of this place and the other place. He knows this, and that is why we have this bill in front of us today. Those opposite have to actually get this bill passed, not just bully the CEO and the board. The CEO and board have legal obligations under the CEFC Act and the Commonwealth Authorities and Companies Act 1997. The board has received advice that:
A direction to cease activities or cease investments, or to cease payments, would frustrate the legislative purpose of the CEFC Act and would be inconsistent with the CEFC Act ... the CEFC's activities cannot be terminated by executive action.
Mr Hockey is asking the board to act against its own responsibilities under the CEFC Act, and I find this is extremely disappointing from the Treasurer.
Let us not forget that the Minister for the Environment, Mr Greg Hunt, has described the Clean Energy Finance Corporation as a 'giant green hedge fund'. I would like to take the opportunity to voice the concerns that the CEFC had with this statement and that they addressed in their submission when they said:
The CEFC is not a hedge fund in any way, shape or form. The CEFC has $536 million invested of which:
So while it has the ability to do so under its legislation, the CEFC has not engaged in any hedging, derivatives or guarantees.
The Abbott government have not given any clear reasons for wanting to close this corporation. If those opposite are concerned because its lending is backed by government bonds, as I said previously, it is making a profit of around four per cent. If those opposite are concerned that it is backing projects that the private sector will not back, as I said previously, it is leveraging almost $3 for every dollar it lends.
Is it because those on the government side really do not believe in climate change at all? Is that the real reason? Is it because Tony Abbott believes climate change is 'absolute crap'? Are those opposite really wishing to destroy the Clean Energy Finance Corporation, destroy the projects and jobs that are backed by the CEFC and destroy the pipeline of clean energy projects just because they do not believe in climate change? This decision makes absolutely no economic sense. This decision makes no environmental sense. If we are to make a five per cent emissions reduction target by 2020 then there is absolutely no environmental sense to this decision. If the government do not believe in climate change, they should just fess up. If they are acting on behalf of the interests of their friends in the oil and coal sectors, they should just fess up. They should just be honest with the Australian people. It is just a pattern of behaviour from an untrustworthy, backflipping, antiscience government. The Australian people deserve much, much better.
I would like to finish with one final quote from the Clean Energy Finance Corporation's submission to the Senate inquiry:
In the short time since its establishment the CEFC has demonstrated its capability and its potential to assist our economy making the transition to Australia's future energy mix. Through its activities (should it continue to exist), the CEFC can play a valuable part in the developing the capabilities and capacity of a globally competitive Australian clean energy sector and in catalysing investment in new energy infrastructure and energy efficiency across the economy.
I call upon the Senate to reject this extremely thoughtless, short-sighted and ideological bill.